On Monday, Jefferies maintained a Buy rating on Zillow (NASDAQ:Z) and raised the price target to $80 from $70.
The firm cites three primary reasons for the optimistic stance on the online real estate company. First, they anticipate that Zillow's Core Premier Agent business will gain from an approximately 50% recovery in Housing Transaction Value.
Second, the expansion of new products is expected to contribute around $500 million of incremental revenue.
Lastly, the low variable costs associated with these revenue streams are projected to enhance EBITDA growth, which could outpace that of Zillow's peers.
The analyst at Jefferies pointed out Zillow's consistent performance, highlighting that the company has exceeded expectations in the past 11 quarters. This trend is expected to persist as the company benefits from the introduction and expansion of new products. The potential for increased revenue and efficient cost management is seen as a key driver for the company's future financial success.
In other recent news, Zillow Group (NASDAQ:ZG) demonstrated a robust financial performance in the second quarter of 2024, with revenues climbing to $572 million, marking a 13% increase year-over-year, mainly driven by the company's rental and mortgage sectors.
DA Davidson raised the stock's price target to $71 from $52, maintaining a Buy rating due to Zillow's Listing Showcase offering's success. Piper Sandler also maintained a positive stance on Zillow, retaining an Overweight rating and a price target of $62.00.
Zillow also completed an unregistered sale of equity securities, issuing 1,935,099 shares of its Class C capital stock and making aggregate cash payments totaling about $609.9 million. This move is part of Zillow's broader strategy to manage its debt and equity. Furthermore, Cantor Fitzgerald initiated coverage on Zillow's shares with a Neutral rating, citing the potential for a boost in the company's fundamentals due to an anticipated recovery in the real estate market.
InvestingPro Insights
Zillow's recent performance aligns with Jefferies' optimistic outlook. According to InvestingPro data, Zillow has shown strong returns over various timeframes, with a 36.62% price total return over the last three months and a 42.76% return over the past year. This performance supports Jefferies' view on Zillow's potential for continued growth.
InvestingPro Tips highlight that Zillow's management has been aggressively buying back shares, which often signals confidence in the company's future prospects. Additionally, the company holds more cash than debt on its balance sheet, providing financial flexibility to pursue growth initiatives like the new products mentioned in Jefferies' analysis.
While Zillow wasn't profitable over the last twelve months, InvestingPro Tips indicate that analysts predict the company will be profitable this year. This aligns with Jefferies' expectation of enhanced EBITDA growth outpacing peers, particularly given the anticipated low variable costs associated with new revenue streams.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Zillow, providing deeper insights into the company's financial health and market position.
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